Supreme Court opinion gives comfort to government in 2G and Coalgate scandals

The Supreme Court on Thursday said auction was a preferable method for allotment of natural resources but it could not be said to be the only method for allocating all natural resources by the government.

In its opinion on a Presidential Reference moved in the backdrop of the February 2 apex court judgment cancelling 122 2G spectrum licences, a five-judge bench presided over by Chief Justice of India SH Kapadia stressed that auction being the only permissible method for disposal of natural resources was neither supported by law nor by logic.

In view of the fact that it was exercising its advisory jurisdiction, the court distanced itself from the February 2 ruling cancelling the spectrum licences granted on a first-come-first-serve basis.

Justice SH Kapadia headed a five-judge bench that gave its opinion on a Presidential
Reference moved in the backdrop of an SC order cancelling 122 2G spectrum licences

The opinion will not have any impact on the proposed allocation of spectrum through auction in terms of the February 2 judgment.

But the opinion will give a major boost to the government which is finding it difficult to justify its decision to allocate coal blocks without conducting an auction.

Telecom minister Kapil Sibal on Thursday said the Supreme Court's judgment on the auction of natural resources had brought constitutional clarity on the issue. He clarified that the government will go ahead with the 2G spectrum auction in November.

Sibal said the government had since the beginning been saying that auction was not the only way for allocating natural resources.

'This is exactly what the government's position was earlier and this is exactly what the court has said, so the government's position has accordingly been fully vindicated,' he said.

On the future allocation of natural resources, the minister said these will be decided on a case-by-case basis.

He said, 'Certain constitutional bodies might have perhaps unwittingly, erroneously interpreted the Supreme Court judgment relating to the 2G case and thought that all natural resources must be auctioned,' adding: 'The government can now frame policies without the fear of interference from constitutional authorities.'

He defended the allocation of 2G spectrum on a first-come-firstserve basis because 'it was the correct thing to do at that time'. In law, the apex court's opinion will not be binding as a precedent but will have a persuasive value in courts.

Even though the court refused to give precedence to one method of allocation over another and decided to leave it to government policy, it stressed that if 'a policy or law is patently unfair' the court will not hesitate in striking it down.

This will happen if a natural resource is allocated for profiteering by private parties as against serving the public good, the Supreme Court said.

On allocation of natural resources for private and commercial ventures, the court said the overarching and underlying constitutional principle governing the distribution of natural resources was 'furtherance of public good'.

'Revenue maximisation is not the only way in which the common good can be subserved.

Where revenue maximisation is the object of a policy, being considered qua that resource at that point of time to be the best way to subserve the common good, auction would be one of the preferable methods, though not the only method,' the court said.

'Where revenue maximisation is not the object of a policy of distribution, the question of auction would not arise. Revenue considerations may assume secondary consideration to developmental considerations,' the court said.

The court said it could not strike down auction merely because it was likely to be misused. However, it clearly seemed to have leaned in favour of auction as a method.

'In our opinion, auction despite being a more preferable method of alienation/ allotment of natural resources, cannot be held to be a constitutional requirement or limitation for alienation of all natural resources and therefore, every method other than auction cannot be struck down as ultra-vires the constitutional mandate.' the court said.

Policy decision The court said it was obvious that the manner in which the common good would be best subserved was not a matter that could be measured by any constitutional yardstick - it would depend on the economic and political philosophy of the government.

Telecom minister Kapil Sibal

'We may, however, hasten to add that the court can test the legality and constitutionality of these methods,' Justice DK Jain, who wrote the judgment for himself, Justice SH Kapadia, Justice Dipak Misra and Justice Ranjan Gogoi, said. Justice JS Khehar agreed with the majority but preferred to write a separate judgment.

Justice Jain stressed that alienation of natural resources was a policy decision, and the means adopted for it were, thus, executive prerogatives.

'However, when such a policy decision is not backed by a social or welfare purpose, and precious and scarce natural resources are alienated for commercial pursuits of profit maximising private entrepreneurs, adoption of means other than those that are competitive and maximise revenue may be arbitrary and face the wrath of Article 14 of the Constitution,' he said.